Greencross is the largest network by market share

All aboard the pet care, veterinary rationalisation cycle​

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Australia's pet care market remains highly fragmented and further consolidation is expected.

• • by

• • Sarah Thompson

• • Anthony Macdonald

• Joyce Moullakis

Australia's pet care and veterinary sector is ripe for another round of consolidation, particularly if global transactions are anything to go by.
Last month, Mars, the global confectionary giant, agreed to buy pet hospital operator VCA for $US7.7 billion ($10.2 billion) in a transaction that will deliver the company about 800 pet hospitals in addition to its network of more than 900 clinics.
The deal refocused attention on the burgeoning $8 billion local pet care and vet industry, which remains highly fragmented.
Pet ownership is high in Australia, at about 63 per cent of households, compared to 40 per cent in the US.
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At the smaller end of the scale, mid-market private equity firm Mercury Capital is attempting to sell its Australian Animal Hospitals business and last year tapped Miles Advisory Partners to consider strategic options. (The business was formerly known as VetWest).

The company is touted as being largest veterinary services group operating in the Perth and Adelaide metropolitan regions.
Street Talk understands parties including Sydney-based Vetfriends and VetPartners, which has partnered with California-based National Veterinary Associates, are in talks with Mercury about acquiring or merging their businesses with Australian Animal Hospitals.
ASX-listed group Greencross is said to have pulled away from the process while National Veterinary Care may still be around the auction.
The industry has already seen a flurry of private equity-led transactions.
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Greencross is the largest network by market share and found itself in the crosshairs of private equity suitors TPG and The Carlyle Group last year. The company rejected a sweetened $770 million takeover bid by the pair but remains on the watch list of financial sponsors looking for deals.
Morningstar analysts have noted that the Mars acquisition of VCA implies a forward enterprise value/earnings before interest tax, depreciation and amortisation multiple of roughly 18 times, "significantly higher" than the 11 times multiple implied by the research house's estimate for Greencross.
Already this year, Blue Sky Alternative Investments has completed the sale of its stake in Pet Circle.
Another business which will come to market over the next 18 months is The Growth Fund-backed Best Friends Pets.

Quadrant Private Equity has also had a good run in the sector and acquired VIP Petfoods in 2015.
Elsewhere, as revealed by Street Talk, stockpicker Hugh Dive has struck out on his own after the debacle of Aurora Funds Management. Dive has set up Atlas Funds Management.


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